Photograph by: Fotolia, Fotolia
BY GARRY MARR, FINANCIAL POST
It’s hard to criticize Ottawa, along with the major banks, when it comes to the generosity and promotion of the Registered Disability-Savings Plan.
The grants are generous enough that someone contributing $1,500 can receive $3,500 from the federal government every year to a maximum of $70,000. At the lowest income level, you can get up to $1,000 a year and maximum of $20,000 lifetime by just applying without putting up a cent of your own money.
And the banks? Some have been better at promoting RDSPs than others but the truth is the program is not profitable for them so their participation should be appreciated.
Yet, in the three years since the program was announced, just 48,000 accounts have been opened, serving only a fraction of those eligible.
So last week the Conservative government, to its credit again because it was the Tories that started this ball rolling, announced a review of the plan. The public has until Dec. 16 to comment.
“[The RDSP] has been a remarkable success,” said Jim Flaherty, the federal Finance Minister. “It has worked well and we want to make sure it is working as well as it should work. We are going to try make it even better than it is already is.”
Mr. Flaherty credits financial institutions for making people aware of RDSPs. “I have to tell you the financial institutions stepped up to the plate on this one because it’s not a money maker for them but in my view it was a matter of important social policy, enlightened social policy,” he said. “I won’t name the financial institutions but a couple of them totally stepped up to the plate.”
I can tell you one is the Bank of Montreal, a leader in the field from the beginning; it now controls about 50% of the market.
Mark Stewart, director of product development and management for BMO Investments Inc., says his bank’s submissions to Ottawa will focus on making it easier for Canadians to open RDSPs.
“There is a lack of awareness out there about RDSPs,” said Mr. Stewart, noting a BMO survey found only 5% cent of Canadians with disabilities hold RDSP accounts. Another 44% of those with disabilities had never heard about the plan.
Setting up the plan is not that difficult but it does require that you be eligible for the disability tax credit which can only be filled out by certain healthcare professionals and has to be approved by the Canada Revenue Agency. Health-care workers have complained about the complexity of the forms and Mr. Flaherty said changing that is under consideration.
The government will also consider rules covering guardianship of plans which have made it difficult to open accounts in some provinces. The 10year rule, which says you can’t withdraw cash from the plan until a decade after your last contribution or face repayment of the grant money, could change.
Another factor sighted in low participation is the rule that forces you to collapse the plan – and again pay back grants – if you become no longer disabled. People who some sort of episodic diminished capacity are impacted by this.
Jack Styan, managing director of RDSP Resource Centre at Ability Tax Group, said he’s still shocked how word just has not gotten out about the plan.
“I was talking to a group of lawyers last week and they hadn’t even known about it. If it hasn’t crossed their path, how is the average working Joe or someone with a disability supposed to know,” he says.
My owns two cents – I think informing those eligible for RDSP should occur on the front lines with health-care practitioners playing a key role. Think of the Registered Education Savings Plan. You can’t seem to step foot in a pediatrician’s office without spotting pamphlets for the RESP program.
Whatever the answer, the message needs to get out. The RDSP is a great program. Spread the word. Please.